THG lowers profit guidance as it launches new strategy

THG has revealed it now expects its EBITDA to come in between £70m-£80m, down from £100m-130m, due to lower full-year sales outturn.

During the full-year period ended 31 December 2022, the online retail group said the guidance comes despite record sales of £2.25bn, boosted by +9.4% increase in THG Beauty and THG Nutrition’s primary territories.

The group also completed a divisional reorganisation which it said is driving continued profit progression through greater divisional cost transparency, the removal of duplicated costs, procurement and payroll efficiencies.

During the year, THG also implemented a group-wide headcount reduction of c. 2,000 employees following elevated investment over recent years, achieved through managed attrition alongside continued recruitment of digital talent.

Following the group’s divisional reorganisation, THG’s board has commenced a strategic review of trading activities outside of THG Beauty, THG Nutrition and THG Ingenuity.

It added these core divisions are expected to deliver adjusted EBITDA on a continuing basis of c. £100m for FY 2022, reflecting the removal of c. £20m of losses from discontinued revenues.

CEO Matthew Moulding said: “In a year that presented numerous challenges across the world, I’m proud that the THG team has delivered another record revenue performance at £2.25 billion. Amongst many highlights, I’m especially pleased with the progress of Ingenuity, successfully competing with major global technology giants to transform digital operations for global retailers and brands.

“With the completion of the divisional reorganisation, and around £100m of annual efficiency savings already delivered, the group enters 2023 with strong momentum to achieve substantial margin expansion. Core commodity prices used within our Nutrition division have seen significant deflation since their record highs in 2022, giving us confidence in significant profit progression as we move through the year ahead, against a much reduced group cost base.”

He added: “We remain highly confident of delivering adjusted EBITDA margins in excess of 9.0% over the medium-term. Our delivery of c. £50m free cashflow in H2 2022, coupled with c. £640m of cash and facilities at year end, mean we are well positioned for further operational and strategic progress, notwithstanding the continued macroeconomic uncertainty.”